'Cheeky' UK retail giants pass £5.7bn shopping bill to customers

Published on Sunday 19 July 2009 22:15

THE UK's biggest supermarket chains managed to avoid the cost of soaring food inflation last year by passing the full £5.7 billion cost on to the country's recession-hit shoppers, a new report has shown.

Millions of consumers were left bearing the brunt of the cost of higher commodity prices as the high street giants imposed price hikes, according to the latest research.

Trade magazine The Grocer reported that Britain's big four supermarkets – Tesco, Asda, Sainsbury's and Morrisons – were not harmed by food inflation last year because they "cheekily" passed the full 5.7bn bill on to consumers.

The country's biggest food and drink producers faced a 19 per cent increase in commodity costs, which amounted to a total cost hike of 5.7bn, research by strategy consultancy OC&C for The Grocer's top 150 suppliers reveals.

The data shows that an estimated 5.6bn of this was recouped through higher selling prices to retailers, leaving the top 150 suppliers with an overall margin hit of just 0.1 per cent.

Meanwhile, the report reveals major retailers also netted themselves an extra 100 million through additional price rises or by cutting administration and distribution costs.

OC&C associate partner Will Hayllar said: "Food inflation certainly has not harmed retailers. On balance, they may even be slight beneficiaries, as their huge scale has let them pass on extra commodity costs. Consumers have been left bearing the brunt of inflation this year."

But Mr Hayllar said that while suppliers had successfully passed on most of the 2008-9 food price inflation, they had still not recovered the costs incurred absorbing inflation in 2007, which represented a 1.2 per cent hit on profits.